Interview with Michael Rowland, ABC News Breakfast

In that speech you will highlight the growing gap between what the States and Territories spend and what they collect in revenue. Is a broader and higher GST the best way of bridging that gap?

TREASURER:

Well, not necessarily at all. As you know, every dollar of the GST goes to the States, but the GST itself is under pressure with people being able to buy more goods and services over the internet from other countries. The GST base itself is under pressure and this is why we released a taxation discussion paper earlier this year. This is why we are focussed on having a sensible, considered approach to taxation reform, simply with a view to ensure that taxes overall are lower, simpler and fairer.

JOURNALIST:

Would you like the States to eventually take full control of public hospitals and public schools and if that’s the case, don’t they need access to a big revenue base like a higher, like a broader GST to do that?

TREASURER:

That’s what the Prime Minister will be discussing with the States when they have a retreat in the next week or so. It is about how we can make the Federation more efficient and how we can remove the duplication between the States and the Commonwealth. I think that that’s a good thing. If we can make the economy and the country more efficient and make it more productive, then we lift the tide so that we get everyone benefitting from greater prosperity.

JOURNALIST:

Would you like the States and Territories to get behind a higher and broader GST?

TREASURER:

Well, that’s a matter for them because it’s their tax, it’s their revenue. The only way the GST is going to change is, as the Prime Minister and I and all my colleagues have been saying, is if there is universal agreement amongst the States and the Territories, and there is bipartisan agreement in Canberra. Because there’s no use the States saying well we want to change the GST and then lumping it on the Federal Government to change it and Bill Shorten says no, we’re opposing it, we’re going to block it. That’s ridiculous. It’s not a way to reform the taxation system. The way to have a better taxation system is to look at how we can simplify the system and make it fairer and also make it future proof.

JOURNALIST:

But if it isn’t a higher GST, where else is the money coming from the States and Territories if they end up doing what you want them to do and that is having full spending control of revenue collection for hospitals and schools and the like?

TREASURER:

Well, that is up to them, in a sense, and we’re saying well we’re prepared to work with you. There are two States, South Australia is having some taxation reform, the ACT actually, the Labor Government as well, has undertaken taxation reform. And where there is taxation reform and you get rid of those inefficient taxes, you can improve the state of your local economy by having a fairer and simpler taxation system, like getting rid of stamp duties and a range of other taxes.

JOURNALIST:

You say it’s a matter for the States and Territories, but as the Treasurer wanting your job a bit easier in terms of who collects what from where, would a higher GST be in Australia’s broad national interest?

TREASURER:

Well, not necessarily at all because if you were to increase the GST, it would be the Federal Government through the income tax system or through the payments system that would need to compensate low and middle income earners who would carry the greatest burden associated with an increase in the GST. So if you were to increase the GST and the benefit went to the States, the Commonwealth would have to find the money to compensate people for the impact of that. Now, that’s a very complicated equation. That’s why we say emphatically, the silver bullet in tax reform is not increasing or broadening the GST, it is about having a considered approached to the entire tax base. One of the things I do specify is that it’s unsustainable to have more and more Australians going into higher personal income tax brackets. At that moment, 10 per cent of taxpayers pay 50 per cent of all, nearly 50 per cent of all, personal income tax. Now that is a huge risk to the taxation system.

JOURNALIST:

It’s called bracket creep. The Federal Government could do something about that by lowering the tax thresholds?

TREASURER:

And that is a good point. That is something that we do aim to do but we also have to decrease government expenditure, because at the moment it’s at elevated levels as a result of what we inherited. We’re never going to, as a nation, tax our way to prosperity. We have to reduce our expenditure and ensure that we do not end up going down the path of some other countries where you lock in higher and higher levels of expenditure, end up with higher levels of taxation and the net result is you become less competitive and it diminishes your economic growth.

JOURNALIST:

What do you make of the Grattan Institute’s suggestion this morning of a broad based land tax, property tax applied to every household across Australia, as a way of eventually reducing or abolishing stamp duties?

TREASURER:

Well, there are some States that are looking at that, have looked at it. The ACT in particular has been looking or has been implementing, in fact, something along those lines. That is again a matter for the States. Obviously stamp duty is deemed to be a bad tax, it’s a transaction tax. If you were to apply it to housing you would have to make sure that people were properly compensated who could not afford to pay it. And that’s a vast chunk of the community, but this is the broad taxation reform agenda. We are considering it. We’re in discussions with the States but I emphasise this is in contrast to what we read about in this morning’s papers where Bill Shorten has come up with not one but two new carbon taxes as a solution to what he sees to be a problem that is being properly addressed elsewhere.

JOURNALIST:

Well Labor says it’s not a carbon tax, it’s an emissions trading scheme.

TREASURER:

Well, look, it’s a carbon tax.

JOURNALIST:

They argue it’s not a carbon tax because it’s not a fixed price, it’s a market based mechanism.

TREASURER:

Well you can have a floating tax, it doesn’t matter. I mean the situation here is Bill Shorten now wants not one carbon tax but two carbon taxes and you have to ask yourself, why would he want to do this? I mean we are meeting, and in fact beating, our emissions reductions targets without hurting the Australian economy and given that the carbon tax brought down two Labor leaders, Kevin Rudd and Julia Gillard, it would be madness for Bill Shorten to follow that path but obviously someone wants to kill Bill at the moment.

JOURNALIST:

Speaking of the GST, are you still in favour of taking it off tampons and other women’s sanitary products?

TREASURER:

Well, I’ve put that to the States again, this emphasises the fact that the States are responsible for this area. I’ve put it to the States and put a cost on it, according to Treasury, and if there is unanimous agreement amongst the States, and they are prepared to support it, that’s their call. We will implement it if that’s their unanimous recommendation.

JOURNALIST:

Fairfax has that cost, according to a leaked letter from you to the States, at $120 million. Is that on the mark?

TREASURER:

That’s about right, yes.

JOURNALIST:

Right, but you’re still in favour of it though, even though you’re wanting the States and Territories [inaudible] because the Prime Minister’s not that keen?

TREASURER:

We said that where there is a change to the GST, and integrity measure or a minor change in the scheme of things such as this, we’ll put it to the States. They’re the ones responsible. Just as the announcement that I made in the Budget about applying it to what’s known as the Netflix tax, that went to the States. There was a unanimous support for that. We are proceeding with that integrity measure. I’ll also be putting to the States, again, the option of applying the GST to parcels that come from overseas of less than the low value threshold. Again, when it comes to integrity measures this is a state tax. When it comes to broadening the GST or increasing the GST it’s a state tax. It’s their call because they get the money.

JOURNALIST:

Just before we go, you recently won that $200,000 defamation payout from Fairfax. Fairfax lawyers are now arguing you should pay the costs as they consider the costs in court. Do you think that’s a fair proposal?

TREASURER:

You know what Michael, this is before the courts. I’ll leave it before the courts. I’m not going to let it distract me from my job. I’ll have plenty to say about this, plenty to say when the matter’s over.

JOURNALIST:

Joe Hockey, Treasurer, thank you very much for your time this morning.